There's a Googalplex of information out there; Why hide it?

Since nobody else has talked about this subject yet, I will take the opportunity for myself. This being a blog, I will say what is on my mind, exactly how I want to say it: Way to go, Google.

The web search engine powerhouse, due to censoring activities of the Chinese government, moved operations of their Chinese-language services to Hong Kong, where users can search and download information uncensored by the government. This action comes shortly after cyber-attacks against the company believed to be aimed at collecting information on local human rights groups took place (Branigan, Jan 13). However, many also believe (me included) Google’s action was more strongly influenced by their principles of information freedom. Because of this action, Google has done it again. In this intricate act of principle and defiance, Google has not only re-established themselves as a leading innovator, as well as one of the strongest entrepreneurial centers in the world, they have provided economic benefit for the Chinese population, as well as the rest of the world, by acting to bypass this censorship.

After all, in the past 12 years, Google has achieved success of which many companies (Or, rather, individuals within companies) can only dream. Started in 1998 by Larry Page and Sergey Brin, two Stanford grad students, Google now grosses roughly $180 B in market capital, according to MSN Investing (MSN Investing). This success can only have occurred because Google offered something to people that no one else before had offered them. That something is stated right in Google’s mission statement: “to organize the world's information and make it universally accessible and useful” (Look for yourself). The keyword here, I believe, is useful; in those 12 short years, Google has developed a system of indexing information unmatched on the internet today. Even the advertising displayed on the engine webpage, the sole source of their tremendous profits, is designed to reflect the relevant information pertaining to particular search parameters. However, it is the terms universally accessible that may be the driving force behind the company’s radical action. In Google’s list of “Ten Things we know to be true,” True Thing #8 summarizes an almost philosophical standpoint:
“The need for information crosses all borders.”(Google's True Things)

It is exactly at this point that abiding by moral stance and operating under economic principle coincide. The standpoint to supply information “across borders” exemplifies a solid understanding of the network of information that exists around us. And, of course, who better to know about this network than the mighty Google?

In his Individualism and Economic Order, F.A. Hayek explains that the nature of information, specifically information upon which economic decisions are made, is dispersed amongst the minds of all people, and cannot be compiled into one place or body. In this way, the information that each person knows about is unique to him alone:

Practically every individual has some advantage over all the others because he possesses unique information of which beneficial use might be made, but of which use can only be made only if the decisions depending on it are left to him or made with his active co-operation. (Hayek, pg. 80)

The censorship put in place by the Chinese government effectively puts a limit on the breadth and detail of such a network. With less access to the network, decisions of an economic nature are hampered. Google, by moving operations to Hong Kong and sidestepping government censorship, allowed the information network to remain whole and strong, by allowing more pages to be accessed and more individual perspectives of information to be voiced.

There is little doubt that the Chinese government is slightly perturbed about this action by Google, even to the point of removing Google’s ability to use the “Google.cn.com” domain name. Even before the action took place, the U.S. State Department was notified as to Google’s intentions. So why would Google do such a thing, putting their stake in the Chinese market at risk, and cause international strain?

Why, that’s what entrepreneurs do! The function of the entrepreneur not only innovates and satisfies unmet desires, but also serves to, for lack of a better word, “fix” the economy when it…well….breaks. Why would the economy “break”? When government, ignorant to economic process, intervenes in such processes.

And now we wait and see the results. Speaking from a purely speculative point of view, it may come to be that, if Google is removed entirely from the Chinese market, there is a tremendous void of information available to the Chinese population: The best search engine was kicked out, and other companies would not challenge the government like Google did! For the time being, however, Google has still proven themselves both morally and economically. Way to go, Google; What will you do next?

Reference: Hayek, F.A. Individualism and Economic Order. 1948. University of Chicago Press, Chicago, IL

The Expansion of Power within Government

Recently, the passing of the controversial health care bill has got many people in an uproar. A majority of the people opposed strongly disagree with the plan mainly because, under this bill, the government will grow in size, power and reach. From the Austrian econ perspective, one can examine this situation and confidently state that in many ways, the government is increasing its use of “force.” For example, under this bill, the IRS will make a person prove that he has health insurance and specifically, the "right kind" of insurance- as they define it. And he doesn’t meet their standards and their rules, he will have to put up with the wrath of the IRS. Furthermore, the bill also states the following:

The Internal Revenue Service will function as the government’s chief enforcer for health care reform... monitoring both businesses and individuals to certify whether they have the insurance coverage the government requires.

The [IRS] will [monitor and enforce] compliance with the individual and employer insurance mandates... how and when health care is paid for, when health insurance is purchased... [and] minimum level[s] of health insurance.... [The] IRS [will] monitor individuals and employers and punish those who do not comply.

Every individual and most businesses [will be] required to report to the IRS, on their tax returns, whether they have purchased or provided the required level of coverage and disclose to the IRS which months, if any, in which they failed to do so....

If the above information does not reflect the government’s expansion of power or “force,” then what does? If that information alone is not enough to convince a person of the far reaching power of the government, consider this: In order to enforce above rules and regulations, the “Congressional Budget Office estimated that the IRS will need $10 billion in additional funds… to fund an additional 16,500 new IRS agents and other personnel to monitor and enforce the new mandates” (CNS News). This means that the government, via the IRS, now has the legal right to poke their nose into our businesses, our homes, our families and our very lives. Various polls suggest that a large portion of Americans do not support the bill. This bill was, therefore, pushed or forced upon the American people against their will. With the government growing in size, scope, and control, it’s no wonder that many people are angry with the recent passage of the healthcare bill.

In another case very similar to the healthcare example, a recent article in Business Week entitled “A Caribbean Tax Holiday” provides some insightful information regarding recent investigations being done by the U.S. internal revenue service into the “$100 billion a year in retail credit-card receipts is escaping taxation” (Silver-Greenberg 46). Here, like with the healthcare bill, the government is seeking to increase its power in order to crack down on tax evasion by individuals and corporations.

The article explains how some business owners are choosing to minimize U.S. tax bills by “sending credit-card receipts to Panama, Nevis, Aruba, the Cayman Islands, and other business havens” (Silver-Greenberg 46) in order to payout less in sales and income taxes. While significant portions of the article suggest that most of these businesses are acting legally and within the legal bounds the law, it is interesting to note that in its effort to crack down on corporate tax minimization strategies, the IRS has begun to meddle within private businesses and their practices. The IRS began looking into international payment processors that help U.S.-based businesses export their card receipts. In order to search company records, the IRS issues a subpoena and demands the “names of all U.S. merchants that have retained the company to help them deposit credit-card receipts is foreign banks” (Silver-Greenberg 48). In doing so, the IRS can then determine whether or not a certain company is facilitating tax evasion.

IRS leading agent Daniel Reeves declined to talk to Bloomberg Business week about the investigation and the IRS declined to “provide specifics about the continuing probe” (Silver-Greenberg 46). Some might discount this statement as just an interesting bit of information, but such an action does beg the question, “What does the IRS have to hide?” It’s not to say that they are doing something wrong, but rather that those within the agency realize they are blurring the lines of their duties and may in fact be operating outside of its bounds. These actions may be entirely plausible, especially in light of the administration’s increased need to collect taxes. Whether it be the case of healthcare reform or the offshore tax havens, these real-life examples within the IRS agency display the latest increase in interference within American life and economy and give us a glimpse of how the government has used its growing power to “force” the American people to act how it thinks it best.

Works Cited

Cover, Matt. "IRS Needs $10 Billion to Be Nation." CNS News. N.p., 23 Mar 2010. Web. 30 Mar 2010. .

Silver-Greenberg, Jessica. "A Caribbean Tax Holiday." BusinessWeek. 22 Feb 2010: 46-49. Print.

Economic Growth in Peru

It is often said that “beauty is in the eye of the beholder.” I would suggest that everyone's perception of the world is dependent on his or her beliefs. People look at the world and see it different ways, and sometimes our preconceived notions keep us from seeing the truth. The average person in Peru does not have the same quality of life as the average person in America, but this does not mean that economic growth is not occurring in Peru.

In the last 30 years Peruvians have overcome many hardships including hyperinflation. Despite difficulties the people of Peru have not given up hope, and as Marvin Olasky writes in “Peru Poco A Poco,” they are experiencing “economic improvement little by little.” Many of the ideas that are changing Peru come from the Peruvian economist Hernando de Soto. His support of private property and entrepreneurship has helped revitalize Peru.

Hernando de Soto suggested allowing Peru's poor to build homes on unused land. Once a group of homes is established the owners can legalize their claims by proving they are a community. Peruvians have done this by setting up churches, small libraries, and even community centers. Private property creates stability for these individuals and helps cement entrepreneurship by providing the foundations for businesses.

People in Peru have begun to start small businesses with the help of micro-loans. A micro-loan can range from 100 to 1,000 dollars. A small loan like this allows new entrepreneurs to buy supplies and begin working. Micro-loans allow people to become self-sufficient unlike other types of charity which can lead to dependence, if the charity does not lead to the development of a useful skill. Furthermore microloan groups are improving the community by offering business classes for members and providing support for those taking out new micro-loans. As we discussed in class one benefit of entrepreneurship is that the entrepreneur pays wages to laborers thereby bettering life for those workers. As these new business leaders use micro-loans to get started and grow, capital is beginning to accumulate in the slums of Peru.

Hernando de Soto believed that the individuals of Peru could revitalize the country by entering the market as property owners and entrepreneurs. As he said when referring to the complexities of Peru, “with millions of people whose specialization makes them interdependent, with complex systems of communication between producers and buyers... with competition and a daily flow of information from other countries, it is physically impossible to be familiar with and directly run even a small fraction of national activities.” Like Austrian economists, Hernando de Soto believes in the individual. He recognizes that a central planner cannot know everything, and that therefore an economy is more successful when individuals make decisions with the knowledge that they possess. A person in Peru many not have what I have, but the only reason I have what I have is because of the capital accumulation of previous generations. Hernando de Soto's ideas have started Peru along the path of capital accumulation, and the people of Peru have hope because of it.

Reference:
Olasky, Marvin. “Peru Poco A Poco.” World Magazine. 13 March 2010.

There goes the economy...

I was a little frustrated a few days ago when it was announced that the new health care hoopla passed the vote. I don’t mind that idea behind it is to help those without coverage. But is that really the purpose of this bill? I would submit unto you Nay!

1) Why put into effect a health care plan that will affect 100% of Americans, when only approximately 10% of Americans are without coverage? It just doesn’t compute! And that’s including the large number of 18 – 30 year-olds who choose not to get coverage because they feel they don’t need it. They would rather buy a big screen TV, than “waste” their money on an intangible good like insurance. Why not come up with a plan that will benefit just those that are without coverage, and can’t afford it?! Congress should be smart enough to come up with such a solution. Maybe I’m giving them too much credit. After all, this is the same group that couldn’t find a way to put the bill on the internet. Give me a break!

2) Do the individuals that voted on this bill understand that well over 60% of Americans did not want this bill passed, let alone the effects it would have on the economy? NAY…One would think.


Rahm Emanuel stated in 2009, “You never want a serious crisis to go to waste - and what I mean by that is it’s an opportunity to do things that you didn’t think you could do before.” The American people in a clear majority, through polls, tea parties, etc., do not want this. Yet the White House is taking advantage of the current recession to push through something that will break down America even more. With unemployment already at 16%, including those who have just given up on looking for work, the government wants to cause even more people to lose their jobs. Oh, but they are creating 16,000 new jobs in the IRS to monitor this program. The only sector in which there seems to be growth now days is in the government. Maybe all the poor individuals who will be losing their jobs in the health care and insurance industries can go work for the IRS.

Well, if they know how detrimental it would be to affect 1/6 of the economy, then you’d think they would keep their conniving little hands to themselves. That’s not the case. The goal of this administration is to break down and eliminate the private sector, when it comes to insurance. This will lead to even more reliance on the government than people already have.
The government is effectively offering the option to wait until coverage is needed, buy it, and when it is no longer needed, get rid of it. This is a cheaper option to everyone than to own private coverage. By offering a fine to those who do not have coverage, it is intentionally cheaper than the cost of coverage itself, and by eliminating the preexisting conditions clauses, it allows for individuals to easily take advantage of the system. In doing this, definitionally, the government is no longer providing insurance; it’s providing welfare.

Unbelievable…

Ignorance and lies lead to failure

It is very obvious that the current administrations posturing on the policies affecting the future of the United States economy is lacking the support of the majority of U.S. citizens. It seems as though the more we protest the less the government listens. This ignorance by our government has the unfortunate similarities of past socialistic governments that have failed. It has been documented and proven by the essay's we are currently discussing in this course that there is no future for the people if the government has too much control and continues to grow. We as Americans have to ask ourselves how much more of the lies and corruption can we take until we reach a breaking point? The politicians continue to string the believers along but they are slowly loosing support. The breaking point is finally being reached.

This is a epic moment in history. It is obvious that the left realizes its radical agenda will be short lived. That is the exact reason why they are trying to pass all of these socialist ideas before the November elections. They are like sheep being lead to the slaughter house. By not recognizing what the majority of people want and the fact that America became so wealthy because of the lack of government in the system, they will fail. So let them continue to disregard the peoples wishes, press on with a socialistic agenda and continue to lie. The truth has come out, they will be voted out, and destroy the Democratic party.

From what I have read the November elections are gaining support by the people to elect individuals with a business background, not a political one. Where taking responsibility for your actions and decisions will have merit over the governing parties agenda. Once again our representatives will reflect the voices of the people not the government in power. This cleansing of our government will provide a base for the entreprenural spirit and lead to a prosperous economy vs. a prospering government.

Vote the liars out.

Healthcare: A Little Common Sense

In my myriad of researching, opinion-creating, and philosophy-searching, one thing is clear:

I still remain confused as to how to solve our healthcare dilemma.

But the question remains: how does the US outspend everyone else on healthcare but still rank behind literally every other developed country on life expectancy and survival rates from pretty much everything other than cancer, something that the Conservatives like to spout off about like it's some sort of one-stop refutation.

Read: Great Britain and most other European nations have GREATER survival rates for most other chronic diseases other than some cancers. And in some, like France, the wait times are actually competitive with ones in the US for procedures. Wait times are not nightmarish in every socialized healthcare country like they may be in Canada.

My general guiding philosophy is that socialized healthcare obviously and without dispute results in much more positively valued macro-scale health indicators for the population of a nation as a whole. Also, I know from economics that healthcare is a sui generis good, and profit incentives in healthcare are directly in line with denying as much of the product as possible, unlike most tangible goods.

This is troubling because healthcare is a good that determines life or death at a fundamental level. Most socialized countries pay between 2 and 5 cents per dollar per capita on administrative overhead and bureaucracy, a word Republicans love to use. We spend 29 cents per dollar on our private bureaucracy, out of a per capita amount that's twice as high as the next highest nation. Talk about stupidity and inefficiency.

Also, from the perspective of insurance, it is Econ 101 that insurance, in any form, is most efficient when the risk is diluted as much as possible per a population. This is the entire point of the idea. Insurance, private or public, cannot be efficient or effective when you are not required to pay into the system or to have it. You are required to have car insurance for the same reason; if car insurance were optional for car owners, the whole system would break down.

Healthcare is the same, except as a good it applies to everyone universally, since everyone has a mortal body subject to harm. Therefore it only makes sense that everyone has it, without the option to opt out. This is especially important with health because the current optional system conflicts directly with societal morals; if you willfully choose to not have insurance and get into a a bad accident, you still must be treated according to the law and according to morality and decency. So we either change morality to be logically consistent, i.e.- don't treat those who have chosen not to get insurance no matter what unless they wish to pay out of pocket up front, or we change the universality of insurance. And one is much easier and more morally palatable to do than the other.

However, I also know that even though it is a sui generis good, it is still a good that is subject to scarcity, and I am swayed that socialized healthcare, at least in the classical sense, does fail at the margins and does fail to effect innovation. Yes, it is true that 5 out of the 10 largest pharmaceuticals are based in socialized-healthcare countries, but these companies rely on the profits from the US market in order to innovate. This is a fact.

Having said all this, my position is that I'm all right with private healthcare, as long as everyone is required to have it under penalty of law, it can be sold across state lines, and it is price regulated to a small extent. However, I'm also all right with completely socializing the system, for the greater good and in the name of efficiency.

I also desire tort reform and believe it is an essential step as well.

But I'm not convinced that the healthcare bill does any of the above. Bill Mahrer has joked that it is essentially a [naughty word] to the insurance industry, and I think he's right as far as I know. However, I also feel that even if it is a severely flawed bill, it is our only shot at actually changing anything. Heaven knows a Republican won't do it.

So I'm torn. I don't know what's going to happen to healthcare reform, but I just want to believe that the current proposal will be the start in making some changes, despite its huge flaws. I don't know if I can though.... I wish they would just rewrite the whole thing, Democrats would let tort reform and interstate competition happen, and we mandate universal coverage under penalty of law. Heck, I'd even be in favor of getting rid of Medicare and Medicaid completely...

To get efficiency we need to focus on ONE approach, whether it be public-insurance for all, Medicare for all, or private insurance for all. I don't care. The key is to make it universal.

Then the system would be fixed. Period.

©2010 Drew Willsey.

Uncle Sam's Toy Train Set

"There's something about a train that's magic." - Amtrak slogan.

For RTD-Denver's light rail expansion project, the magic is dead on the tracks. According to an article in the February 20th edition of The Economist, FasTracks, the system's third and largest expansion project ground to a halt. An ambitious plan, the Regional Transportation District planned 188 miles of additional commuter rail line to be built by 2017. Residents and visitors in the Denver metropolitan area currently fund this public transport-planner's dream with a 0.4% sales tax. Additionally, billions of dollars of our federal tax money will spur the program. Community leaders holding shiny new shovels and wearing business suits topped with one-and-done construction helmets enjoyed the photo opportunity that celebrated how, as Mayor John Hickenlooper described glowingly, "the whole community came together in the region at a level that we've never seen before." According to the original cheerleaders of the project, without new revenue sources, that same "whole community" must wait until 2042 for FasTracks completion.

Ah, the good old days. Visions of new light rail cars carrying drunken sports spectators from taxpayer-funded downtown sports venues to newly constructed Park and Rides for the remainder of the journey home will remain just visions for a good while longer. Thanks to the media touting whatever lowball budget figure local politicians gave them in order to sell the scheme to hopeful voters, Denver-area taxpayers watch in disgust as the current estimate for the project's cost rises (gasp!) 43%, to $6.5 billion. This predicament is the result of two foreseeable events: the fluctuation in long-run sales tax revenue, and new safety requirements, in this case as a reaction to the deadly incompetence of Los Angeles-area light rail operators.

Hmm, what do you suppose might happen next as local governments across the recession-gripped United States everywhere struggle to find revenue with which to provide the basic public safety and infrastructure maintenance? If you guessed double the tax rate, you've got a future in civic government! Whether Denver-area voters approve a ballot initiative this fall to flush more money into an enterprise which few of them will ever use depends on the velocity and sparkle of the spin that area pols will apply to the "vision."

Thankfully, our paternalistic Uncle Sam came to the rescue last week with $300 million in federal loans, a sure sign that the planned billion dollar grant from the Federal Transit Administration is hiding in the caboose. Why? Hint: it's Washington's favorite four-letter word.

Jobs. The Denver Post quotes U.S. Senator Michael Bennet as saying that construction of rail lines and revitalization of Union Station "conservatively could create 10,000 good-paying jobs throughout the metro area." In a metropolitan area of 2.9 million residents, that's almost a one per cent temporary increase in the employment base - spread over six years.

What costs aren't mentioned by the Post or the elected representatives? Many along the Gold Line to Wheat Ridge and the I-70 corridor to Denver International Airport will be forced to sell their private property at fair market value, not an appealing prospect in the current real estate market. More importantly, RTD seeks to remove hundreds of millions of dollars of spending from the local economy, money which could surely fund thousands of commercial sector jobs in industries which consumers wish to support.

Tragically, few who pay the tax will reap an equivalent value for their lost spending power. For most New York metro-area residents, the inconvenience of walking to a bus station, riding to the rail station, walking to the office and repeating the process in reverse every weekday is a relatively smaller opportunity cost than car ownership, parking fees and hours in traffic. There, such a system has some viability, though the MTA receives state and federal funds for its lifeline. Denver's RTD, however, shamefully touts FasTracks and light rail expansion as vital to maintain the area's standard of living, an area whose inhabitant spread themselves thinly across 700 square miles. Hopefully, Denver area voters will let their elected officials sweat over the promises they made to local commerce leaders. Hopefully, those leaders of commerce get to keep the money that we'd like to spend on their goods.

The "Left" is not right.

After reading Ludwig von Mises writings on Capitalism and Socialism I found it very clear that Socialism is wrong and Capitalism is the only way to go. Even before reading Mises I knew that Capitalism is far superior to Socialism. Mises explains the details very well and I would have a hard time arguing with his logic. By reading Mises I got a better understanding on both Capitalism and Socialism. Mises states the following:

"Those who call themselves
"liberals" today are asking for policies which are precisely
the opposite of those policies which the liberals of
the nineteenth century advocated in their liberal programs.
The so-called liberals of today have the very
popular idea that freedom of speech, of thought, of the
press, freedom of religion, freedom from imprisonment
without trial—that all these freedoms can be preserved
in the absence of what is called economic freedom. They
do not realize that, in a system where there is no market,
where the government directs everything, all those other
freedoms are illusory, even if they are made into laws
and written up in constitutions."

In the following Gallup poll over 1/3 of Americans have a positive image of Socialism. That is a very high percentage of people that live in a free country that strives off Capitalism. The majority of the people that view Socialism as positive consider themselves to be liberal. As Mises explains that the definition of a liberal is different now than in the past. Today's average Liberal is confused, they want to have all of the freedoms of America and Socialism all wrapped up in one. The combination of freedom and Socialism will never happen. Sorry Liberals, freedom only works with Capitalism. I have a little advice for all you people that like Socialism, look at Socialism in the past, Socialism does NOT work. And read some Mises if you still don't understand.

Bail or Fail, What are the risks? What are the Incentives?

In recent times, we have heard about the “big three” and the controversial discussion regarding the question of whether or not tax dollars should be used to bailout failing businesses. Those in favor of bailouts justify their stance by explaining that such a move would alleviate economic trouble and perhaps hold us back “from the brink” of economic disaster. In contrast to such sentiment often found in discussions within the media, one can see a much different perspective if he only steps back from the situation and makes an effort to see what is really going on. As a topic that most of us have heard about, I would like to discuss the role of failure and the significance of bailouts within our economy.

When an entrepreneur starts a business, he takes a risk-a calculated risk. He takes a risk with the belief that, provided he is correct in his decision-making, he will make a profit on his idea. He knows, however, that if his idea fails and he does not make a profit, he will suffer the costs of a failing business. I'm sure we have heard that (approximately) 50% of businesses fail within the first five years of operation. At the same time we know that 80% of the U.S. Economy is run by small businesses. Why then do prospective business owners decide to start their own businesses? Is it not (at least in part) because they know that they have an idea that is as good, if not better, than a similar product on the market? It is in this way that a person chooses to go into business- because he has determined that it is worth the risk for him to try to enter the market for a certain good or service. How then can a person say that a bailout is necessary for a company that the markets have all ready determined as being inefficient. Does not such a bailout prop up the business and save it from failure? If this is the case, then why would people want to go into business? What is their incentive to bring a better product to market if they will have to compete with an artificially propped- up business- which they know would be traditionally inefficient in the market? As Tyler Watts states in his article, “The Importance of Failure,” “...why strive for profits if Uncle Sam will cover your losses with a bailout? Why bust your butt to compete and succeed if you can just clamor for a handout instead?” In a sense, Watts says, “bailouts destroy the profit motive — and all the benefits of a competitive economy.” If one has the ability to make a profit, he should be allowed to suffer losses.

Clearly, bailouts are requested by those businesses who see that their previous poor decisions are now leading them to an unsustainable (losing profits) path. Do these businesses deserve to be rescued from their business troubles? Most people would answer “no” to these questions. Of course, when a business is viewed as being “too big too fail,” thereby implying that the absence of a bailout would surely mean economic disaster for the public as a whole, people begin to look at the situation quite differently. Does this argument justify such a move? Taking on the traditional Austrian perspective, one would answer, "no” and respond by saying, “just allow the insolvent entities to fail and let the chips fall where they may and let the short-term pain of failure guide a business owner towards more productive, successful choices.” While this is a somewhat simplistic discussion of failure, it is important to note that, in the end, failure within markets allows “capital to move from weak hands to strong hands” (Blumen), thus permitting us to be better off because of it.

References

Blumen, Robert. "Bail or Fail." 7 Oct 2009. Web. 22 Feb 2010. http://blog.mises.org/archives/010791.asp

Watts, Tyler. "The Importance of Failure." Mises Daily 10 Feb 2009. Web. 26 Feb 2010. http://mises.org/daily/3321

Paying Kids to Study

There is a recent article in Newsweek magazine titled "Why Paying Kids to Study Works in Texas" written by Tony Dokoupil. In this article Dokoupil suggests that paying kids to study is an effective way to boost their academic performance. He sites studies that suggest this incentive has helped Texas high-school students who earned money for scoring well on Advanced Placement exams. According to the author these studies showed students achieving a higher GPA and bumps in the likelihood for earning their degree with this paid incentive. The author of this study is Cornell Professor Kirabo Jackson. Jackson is quoted as saying "If you have a million dollars, this is a pretty good way to spend it. It gives cool-minded kids an alibi for success, he adds: I don't like math:I'm saving for an Xbox.'" The funds currently being used to pay out these incentives are from private donors. The main point of this article is not to encourage more private people to donate. The writer of this article makes his point at the end. This cash incentive to do well in school should be adopted into public policy. The government should pay us for doing what is in our best interest.
It is easy to see how this is a terrible idea in many ways. Adopting this into public policy is just another case of unnecessary goverment intervention. I believe that most people would agree that children doing well in school is something that everyone wants, however this is not the way to go about doing it. The government should not pay kids to do well in school for the same reason that it should not pay us to stay away from Taco Bell. We as private citizens can make our own choices and do not need government to tax us in order to provide incentive for others to make the "right" choice. There is already an incentive for kids to do well in school because higher education pays off in many ways. Doing well in school and gaining more education increases their human capital. It is the job of parents and people raising the childern to help them to realize that education is important, not the job of government. This cash incentive will only send kids the message that "Something is only worth doing if I get an immediate reward from it."Also, if these high-school students in Texas are truly only doing well in school for a small immediate monetary gain rather than for gain in the long run, then they are not going to do well after high-school. Is the government then going to pay them to attend college and pay them to find a career after? If government payment was thier only reason for learning then it is only logical that government should look at other aspects of our lives and pay us for what it deems to be the right choice. Most people would agree that excercise is a good thing. Maybe government should pay us $5 for every mile we jog per year. Clearly this idea is ridiculas.

On the Status of the "Progressive" Movement

I want to discuss what has as of lately been referred to as the "progressive," movement in this country. I use the term "progressive," loosely here because I feel that there is little about said movement in the way of advancing our country forward in any helpful manner.

What we have seen throughout the past years, from both major political institutions, is a relatively unprecedented amount of spending in Washington that does little to favor anything outside of big business and big government. As previously aforementioned in other contributions to this blog, the bailout represented companies that were supposedly "too big to fail." This unbelievable amount of spending by the Bush administration was subsequently followed by the Obama administration whose readiness to spend $3.3B over the course of 10 years in a "stimulus," package made the previous bailout almost appear laughable (Source: U.S. News and World Report).

That said, who stands to benefit from this "progressive movement," whose goals ideologically favor large corporations and even larger federal government? Well to put it simply I feel that I have answered my own question. Big business/big government run the show. However, it appears to go beyond that as well, but it's nearly impossible to say exactly what since so much "stimulus," money was sent to phantom zip codes across the country, not unlike this example from the state of North Carolina. Perhaps it is paying off individuals or groups who helped make "change," a reality. Perhaps it allows greater funding to political pet projects under the guise of assisting "smaller," states such as the Carolinas. Or even it could be that those in power want to stay in power, and the forcing of copious amounts of money onto good parts of the country helps to secure that.

In my opinion, we find that both political parties are huge and historically based. Further, the amount of cash flow that comes with that is sizable as well. This being said, we find that neither party is particularly out to serve the American people as organizations. But to take that a step further I think we should find that having a supermajority of either party is never going to be a good thing. The stimulus package, "public option" health care, and the jobs bill are all examples of greediness on the part of the current party in power. All of the previously aforementioned bills set before congress do nothing but favor larger government takeovers, such is the case with health care. Also with the stimulus package, the federal government essentially bought states and companies outright.

Ultimately what we have seen in our day and age is an advancement of a minority of people called the "progressives," into the positions of power on promises of "change." Well truly there has been change but consequently it has mostly involved adding on to the already high amounts of expenditure and increases in government power that Americans were not promised when they voted. Mises wrote of the "insanity," of the American economic climate... I wonder what he would have to say these days?

Washington please take Econ 398

It is unfortunate that over the last twenty five years that the leaders of our nation have been clueless when it comes to keeping America on the economic path to prosperity. We have all asked the question, how did America become the most prosperous, wealthy and innovative country in the world over the last one hundred and fifty years? The answer to that question was the granting of property rights to the common man. No other nation in the world allowed for this right. Because of that concept, the opportunity for the individual to take on risk through entreprenuorship created a basis for markets and trade. This led to individual's making choices to better themselves. The basis for this prosperity is reflected by human action.

Unfortunetly the so called leaders within our Government, Republican or Democrat are more concerned about their own self interest vs. the people they were chosen to represent. Because of this inappropriate human action by the people in power we now have a financial system, housing market and economy in total collapse. Therefore the wizards in Washington are now deciding that interventionism is the solution to remedy our econmy. That concept is exactly what we do not need. We the people are asking for less government intervention and more freedom to prosper once again. But as Ludwig von Mises has stated "The government wants to arrogate to itself the power, which, in the free economy, is in the hands of the consumers" We are seeing this posturing by this administration every day. It is a travesty that issues are being addressed to the public in a capitalistic format, but the backroom dealings are clearly a form of socialism. I believe we have socialism in our economy. The lower class has had it for six generations and now the upper class has joined in, it is obvious by the bailouts given to Wall Street and the Banks. They are no longer taking on any risk, they are to big to fail. The only part of Capitalism left is found in the middle class, and that form of freedom is being taxed and regulated away.

After writing this blog I have to ask myself, have the progressives already taken Economics 398? Their is a pattern in this administration that reflects the writings of Ludwig von Mises, that are being used to transform one of the greatest nations on earth. We are clearly creating policy's that are taking us in the wrong direction as described in our readings, history has shown that.

I am enlightened and energized by this class. I find it very beneficial to me to be studying at a time when the readings pertain to the current government policy's. The progressives feel this is there time in history to redically change America, it will be short lived. I believe that freedom wiil prevail and we will once again become the greatest nation to prosper in.

Matthew Grubesic

Obama's Business Roundtable Speech- Paradoxical or Contradictory

Today President Obama addressed a group of people who represent the most historically successful and significant businesses in America. Insurance providers, car manufacturers, and home goods producers gathered together to hear what changes President Obama has in store for the United States economy. This is not just a question large business owners are wondering about. It is a vital question every American wants answered.

President Obama begins his speech by discussing our current situation and reminding his audience that despite the recent hardship they have previously managed to find common ground. But President Obama does not dwell on the past or linger on the mistakes that led to the current recession, he quickly moves on. Painting a bright future he says, "we need an economy where we generate more jobs here at home... We need to invest and nurture the industries of the future, and we need to train our workers to compete for those jobs." The "we" used in the previous sentence sets the tone for the remainder of the speech. In what could be a reference to High School Musical President Obama says, "we are all in this together." High School Musical presents a rosy world where despite personal differences people decide to help their competitor reach his or her goals. In the end, everyone in the musical is happy with the outcome, because they worked together.

Unfortunately, economic principles do not allow the government and private businesses to work together as successfully as the actors in High School Musical. President Obama upholds previous government projects such as social security, unemployment insurance, and agricultural research as ways in which the government has acted as a catalyst for private business. He wants to continue in this vein by increasing government spending on education, infrastructure, and innovation. At the same time he wants to prevent an "entitlement state" and encourage the growth of businesses. The problem is that the money for all of these different projects has to come from somewhere. If the government is borrowing money for its projects, then businesses are not borrowing that money. One type of spending replaces the other. Mises illustrated this point by referring to the government building a hospital; "the government, appearing on the market as a buyer, replaces the individual citizen" (Mises 57). Instead of borrowing the money, the federal government could raise taxes. But if the government is spending the money, then why earn it in the first place?

Later in the speech President Obama presents ways to revitalize business in the United States. He suggests a tax credit for small businesses that higher new workers and a tax incentive for large businesses to create new factories. This initially sounds like a good idea. Who does not want more employment? The problem is that offering incentives is expensive, and once again the money has to come from somewhere. There is a third way government can come up with money and that is simply to print it. A significant amount of money has already been printed during the Obama administration, because printing money is a way for the government to spend without directly taxing the citizens. However after a period of time printing extra currency leads to inflation and eventually a loss of confidence in the currency. Even in the case of printing money politicians are deciding where the money is to be spent. In addition, with the current uncertainty in the market companies do not need more factories. As of late production has significantly slowed, because people are buying fewer goods. If people are not buying a good, companies cannot make a profit, so why would they want to incur the expense of building an extra factory?

Finally, President Obama addresses the need for "consolidated supervision of all institutions that could pose a risk to the system." He only means to increase government oversight of financial institutions at this time, but in the future if it looks like other types of businesses "pose a risk" there is apparently no reason the government should not step in there as well. Once businesses are overseen by the government, they are more inclined to pander to government bodies and less likely to respect the consumer. As Mises concisely stated the issue, "the government wants to interfere in order to force businessmen to conduct their affairs in a different way than they would have chosen if they had obeyed only the consumers. Thus, all measures of interventionism by the government are directed toward restricting the supremacy of consumers" (Mises 40). When governments regulate business, consumers lose power and voluntary exchange is no longer completely voluntary.

President Obama brings up several other topics in his speech including affordable healthcare, free trade, and energy conservation. President Obama says he will continue to work on trade agreements with foreign nations and will look for ways to lower the deficit. These are all problems that deserve to be discussed in detail, yet all I have time to say here is that if President Obama can accomplish everything he is promising to accomplish while keeping the federal government within its means, he may truly be a miracle worker.

References:

President Barack Obama. "Remarks by the President to the Business Roundtable Quarterly Meeting." 24 February 2010. Web.

Ludwig von Mises. Economic Policy: Thoughts for Today and Tomorrow. Auburn, Alabama: Ludwig von Mises Institute, 2006. Web.

Taking by Force

To offer a little background, without giving too much information away, I’ll start by saying I currently work for a Fortune 500 company that provides television service to its customers. This company currently offers its programming to its employees at a discounted rate. Many of its underpaid employees, like other customers, tend to get behind on their bills, including their television bill.

While talking with my manager yesterday, he brought up the recent push for the majority of this company’s employees to sign up for programming. He then mentioned that previous debts on the part of the employees to the company would possibly be waived. He followed that up with the idea that the company would possibly start taking money directly from employee’s paychecks to pay off future debts to the company, and if they don’t pay it, they’re fired.

This kind of bothered me. I’m all for consumers acting in a responsible manner, and paying off debts that are owed. But to garnish someone’s wages against their wishes doesn’t quite seem like a legal proposition, without the decision of the courts. He took the stance that it was perfectly fine, considering they owed the money. I was opposed to a company overstepping the free agency of the individual to pay the bill at that time, while exercising force, taking the money without offering a choice to the employee.

By taking the money, the company would impose an opportunity cost. Let’s say Tommy has a credit card with a 43% interest rate and is behind on the majority of his bills. He has a change of heart and decides he wants financial freedom. He would more than likely be advised to pay off his bills with the highest interest rates first. After those bills are paid off, the money put toward those bills could go toward paying off bills with the next highest interest rates. After some time, Tommy would eventually reach his goal.

By garnishing the employee’s wages, the company would take away the choice of that individual to act in a manner that would maximize the efficiency of their personal resource allocation. Tommy might have kids he has to feed or provide shelter to. If a company takes money from someone who may have been irresponsible, but is not quite ready to pay something off at that time due to the lack of disposable income, they could be taking resources that were set aside to provide those needs, and leave Tommy without the ability to provide or choice to allocate his resources in an efficient manner.

I’m not refuting the fact that getting into debt with a television provider is irresponsible. However, I do believe in agency, the ability to choose for ones self. My phone company doesn’t have the ability to go to my manager and take what is owed directly from my check. They would report it to a collection agency, my credit would be affected, and I would eventually DECIDE to pay the bill. If another company can’t go into my check and take money, without a court order, then why the hell would the company I work for. In this situation it seems there is a thin line between Capitalism and Socialism.